Frozen Overseas Pensions

The UK State Pension is payable overseas but is not increased (‘uprated’) annually unless there is a legal requirement to do so, for example, where there is a relevant reciprocal social security agreement between the UK and the person’s country of residence.

When it was part of the EU, the UK was part of the EU social security co-ordination rules. This provided for the UK State Pension to be uprated in EU countries in the same way as it was in the UK. This was because social security co-ordination provided for benefits to be exportable but also for equal treatment on grounds of nationality. The arrangements also applied to EEA countries and Switzerland.

The situation to apply when the UK left the European Union, was considered as part of the Brexit negotiations.

In advance of these negotiations being concluded, the UK Government signed a convention with Ireland which meant that “reciprocal benefit and social security rights for Irish and UK nationals and their family members” would continue to operate, regardless of the outcome of the Brexit negotiations (SI 2019/622; Gov.UK, Living in Ireland).

In relation to other EU countries, the Withdrawal Agreement of October 2019 and the Trade and Co-operation Agreement of December 2020 provide for State Pension uprating for those covered:

• For UK nationals living in an EU country by 31 December 2020, provided they meet one of the residence conditions, the Withdrawal Agreement provides for the UK State Pension to continue to be uprated. The UK has similar agreements with the EEA/EFTA states (Norway, Iceland and Liechtenstein) and Switzerland (HM Government, The Withdrawal Agreement: what UK nationals need to know about citizens’ rights, Nov 2020).
• For people who move to an EU country from 1 January 2021, the EU-UK Trade and Co-operation Agreement’s protocol on social security co-ordination provides for uprating of the UK State Pension (Gov.UK Benefits and pensions for UK nationals in the EU, EEA or Switzerland, 31 December 2020).

In May 2020, there were 492,176 people overseas in receipt of a frozen UK State Pension. The vast majority (84%) live in Australia, Canada or New Zealand (DWP Stat-xplore and Benefit Expenditure and Caseload Tables). Their pension remains payable at the same rate as it was when they first became entitled, or the date they left the UK if they were already pensioners then.

The policy of not awarding increases in some countries overseas has been followed by successive governments and continued with the introduction of the new State Pension in April 2016. Reasons given include cost and the desire to focus constrained resources on pensioners in the UK (PQ 131353, 12 March 2018).

The All Party Parliamentary Group on Frozen British Pensions has called on the Government to “urgently review the ‘frozen’ pension policy given the evidence of destitution facing many UK pensioners overseas and the recent impacts of COVID-19,” and is drawing particular attention to the impact on “veterans, former public servants and members of the Windrush Generation who have returned to their country of birth.”

The Government says it has no plans to change this long-standing policy:

The UK State Pension is payable worldwide to those who meet the qualifying conditions. It is up-rated where there is a legal requirement to do so, for example, where recipients are living in countries where there is a reciprocal agreement that provides for up-rating. The Government has no plans to change the policy on up-rating UK State Pensions overseas; the policy is longstanding and has been supported by successive Governments for over 70 years. The Government understands that people move abroad for many reasons and that this can have an impact on their finances. However, the decision to move abroad remains a personal choice. Advice that the UK State Pension is not up-rated overseas except where there is a legal requirement has been provided to the public for many years. Information is provided in leaflets and on gov.uk (PQ HL 11595 5 January 2021).

In February 2019, the Government estimated the cost of uprating frozen pensions to the amounts that would have been in payment had they not been frozen at £600 million in 2019/20, rising to £640 million by 2023/24. In 2016, the International Consortium of British Pensioners estimated the cost of ‘partial uprating’ (uprating frozen pensions from their current value) to be £30 million in year one, rising to £31.5 million by year three.

The issue has been raised in Parliament on numerous occasions. In some years, an early day motion has been tabled praying against the relevant statutory instrument that freezes pensions, which has led to a debate on the issue. The policy has also been subject to an unsuccessful legal challenge.